terminating safe harbor plan with employer contributions

[LIBERTYKID]

Can you terminate a safe harbor 401(k) plan that provides for the 3 percent employer contribution in the middle of the year without a financial hardship? The regs aren't clear. I think you can provide a notice to participants, the 3 percent for the period the plan was in existence, and subject the plan to discrimination testing for the year, but I am not sure. Anyone agree or disagree?

[Kimberly S]

With a safe harbor match you have to give employees 30 days notice that the safe harbor provision is being terminated and the safe harbor contribution must continue through the end of the 30 day notice period. I'm not sure if that also applies to the safe harbor non elective contribution, since it would not impact deferral decisions.

[Tom Poje]

the regs don't address the issue.

at one ASPPA conference the IRS official voiced an 'opinion' you could follow the same guidelines as for the SHMAC but again, that was their opinion only. In other words, it would work pretty much the same as stopping a money purchase mid year, except in this case it is a 401k and you would have to test, etc.